As California energetically attempts to decarbonize the state’s economy, some in Sacramento fear the plan faces a looming threat: astronomical gas prices that could fuel a massive public backlash.
A state mandate will phase out sales of new internal combustion cars and light trucks by 2035. The retail price of gasoline is likely to rise as refineries and other industry players seek to maximize profit before demand for the product fades away.
The California Energy Commission is investigating the issue, and held an all-day hearing on the matter Nov. 29.
The stakes are high. “If we screw this up, whether it’s gasoline prices or an electrical load [from electric cars] that exceeds supply, it’s going to put a black eye on all of the energy transition,” UC Berkeley professor Severin Borenstein told the commission.
Borenstein, who has studied energy prices for decades, recalled the 2000-01 debacle in which California famously botched its aggressive attempt at electricity deregulation. Widespread blackouts caused economic disruption as companies such as Enron gamed the system to their financial advantage. The end result: The state backtracked on electricity deregulation.
Borenstein suggested that gasoline refiners, distributors and retailers may be playing market-shaping games, legal or otherwise, and that the state needs to investigate. It’s unclear whether California politicians will do so.
Meanwhile, Gov. Gavin Newsom has called for a special session that begins Monday to consider a “profit gouging penalty” in response to gasoline price spikes.
The state faces a delicate balance as it, in effect, dismantles the gasoline refinery industry in California.
This year Californians will burn about 15 billion gallons of gasoline. The energy commission forecasts that will drop to 8 billion by 2030 and less than 2 billion by the 2040s.
But there will still be 16 million gasoline and diesel cars on the road in 2035, the state forecasts. No one’s sure how much drivers will be paying at the pump.
The issue was framed by Siva Gunda, the commission’s vice chair, when he kicked off the gas price hearing with an observation and an admission: “Many of us are going to drive gasoline cars for a very long time, including myself, who drove in a gasoline car this morning.”
His comments highlight an obvious reality: While high gas prices hurt the poor and the working class the most, all Californians — whatever their political stripe — dislike high gas prices. Research shows that expensive gasoline nudges some people to buy electric cars.
The ‘California premium’